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tv   [untitled]    June 11, 2014 7:30am-8:01am PDT

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perimeters effect us those are a huge portion of the lease transactions their approximately 64 percent of our lease count but in the everyday transactions the only represent about 15 percent of the real estate department leasing revenue we do the bond presentations to drum up the revenues this is really what the diversity comes from we have a lot of small businesses and they have found a home here. this is a way to look it over time this is port revenues for the real estate division the bottom blue session is basically what the perimeter deals represent to use it really is another way to show the foundation the stable rent comes from the perimeter the
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developments and all layer on top of that and when we're able to weather the sessions the perimeters allows us to do that. so when we determine the rates for the given fiscal year we go through the method doing we include my tractions on port property and we voluntary 0 layer in certainly my condition on the port facility that might make it epilepsy our typical market condition and finally we look at affordability and i'll dive into that certainly we want to maximize we want to balance vacancy periods so if something is vacant now if i try to maximize the rates it might mean
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i don't lease it up in 3 months but 6 months we're trying to balance the rate not per square feet but applies to existing places to the tenant those small businesses when their lease expires that's the perimeter we're setting to make sure that the rate maximizes our fund so those are the things we balance. those first pieces are more complicated because it's tough to compare port to private sector protein i'm going to walk through the i and g park property across from pier 31
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that's our crown jewel of market space so they're considered full services on the general definition and their rate rents those sort of gross rent rate is between 360 and 345 we're proposing today about 325 so i want to give you details. first, this is what i and g waterfront plaza looks like. the security i'm sorry the services have full-time security and have a building engineer and a parking lot adjacent to it that's an extra fee. this is the roundhouse and it's a great 0 location and it's an interesting space but doesn't have the same quality level
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maybe think the b pluses and minuses must level we provide the janitorial the other things that's a big difference in the private sector lymph glands will fund tenant improvements we don't. when you adjust those transactions that range from $2.60 kent i back out the cost of the tenant improvements that we're making our tenants pay for out of the pocket you can see the apples to apples comparison and our 3 dollars and $0.25 is right in between those tractions look like across the street. keep in mind our 325 is the minimal rent we can also ask for more a top floor with a view of
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the water it's less. the tenant improvements just to give you a sense of the significance this is an interior dishonesty round house and this is an interior shot of the house after the improvements from our design tenants they've sunk a lot of money into it. so i thank you for divulging me in the weeds of those examples back out in general we're increasing office rents by 6 percent and some not adjusted at all with the high adjustment of a thirty percent increase in the round house. as a point of comparison cushman and wakefield did a study that shows the rents they're up 8 percent from the prior year that
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is a sense of where our 6 percent falls in market and so that's the port office rents. the challenge of comparing port property to private property also is a problem when you look at sheds to warehouses warehouses have loading bays for the trucks you don't have to lift things up and down they don't have supportive that pill last year's our advantage we have an amazing location this gos close to the businesses and the restaurants in san francisco. we jefferson are able to charge more than our what is a exerts. overall we're looking at the an increase of 3 percent that includes a subsequential
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decrease in the shed of 33 by 44 percent due to the entirety of the load restrictions you can't drive large trucks out there and roofing problems and the lifespan of the building is in question so we can't give people a 5 year lease that's a changing situation. then on the high side increasing the rents by 40 percenters. and finally the last big perimeter rents is land land is again sort of a different part of our portfolio it has a high vacancy rate and we're not having a location driven but in daily city and others counties generally, we're dollars doctors
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the rates of paved and unpaved land by $0.02 and leaving the improved land where it is. from here we're going to come back to the board an june 10th >> on the paved land can the prospective tenant put containers on that. >> i'm going to defer that to one of the leasing managers. >> what. >> please allow me to defer that. >> jeff bower leasing manager. >> so we're actually commissioner we've jumped the gun for a mommy public comment seeing none, public comment is closed. >> go ahead jeff. >> sure someone wanted to put
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storage containers on that's an acceptable use. >> and the rent stays the same? >> well, when i say storage containers are you saying self-storage or it's a construction company. >> for construction equipment i see a lot of containers on the port property i have no idea if it's paved. >> it's acceptable in the construction company wanted to store the material it's the same. >> how much of our office space or rentals would need to have an improvement all of that when we decide to rent out is it in that badass shape. >> it's u actually telethon you
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saw ammunition i believe i brought ammunition before you for approval they put 4 hundred thousand it depends on the tenants smaller tenants want a place for a phone and mailbox it depends on their resources. >> well, now i understand the difference between the private sector and the private sectors they do their own tenants or their tenants do their improvements. >> yeah. what an allowance we'll carpet it for you. >> commissioner brandon and yeah. i had a couple of questions you gave us the unpaved land but didn't discuss parking. so i see from our report 89
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hundred and 80 thousand square
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feet of unpaved land and 9.9 million of paved land and 8 hundred and 31 thousand this the the budget of our space is parking part of that configuration of all those numbers and what's happening with parking we didn't get a report on the parking side. >> thank you commissioner the parking that's subject to the perimeter rent schedule is generally, the stalls of the parking we lease on an
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individual basis like port employers like 3 hundred stalls we manage on the seawall lots those are through a competitive process. >> i guess at some point we'll proposed it as an informational item it's a breakdown exactly again but to refresh us again in terms of how the real estate sort portfolio whether that's a direct lease or how the real estate is putting forth and the components so we understand that so we get a better sense. you mentioned our first lot that was interesting to know that the perimeter rents they're the bulk of a number of leases they contribute very little in terms of the actual percentage of overall revenue is that right >> that's correct. >> so we look at we spend a lot of time looking at the port financials it's the other revenue sources that we need to understand and what's happening with those so we need an understand how those operate in terms of the increase so a summary without having to go through the leases a that's a little bit more informative. >> you mentioned on the buildings you said 6 months if we want to maximize rent is that a curiosity number i think in san francisco it takes 6 months if you wanted the highest rates in this asthmatic that a theoretical number i'm not sure that's current market rate information. >> that's a conceptual example. >> it's important to know that's a very good point on our see of the street we go going through the progress of the commission and board but by the, go faster it generally take pretty long we have some - and i
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think non-market trends it takes time to negotiate. >> i think the differences is it's if i come to agreement when you sell a house if you measure at that time, from when the house is put on the market it's a very long time but when you measure an agreement to sell the house whatever that's a shorter period of time that's market driven but it's driven by other factors and you have to have time it's a question of which metric to use in terms of the actual revenues but how fast can you get that property render and know it's going to be rented auto u out it the medicare metric. >> that's from one tenant
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another. >> one question i've been curious to know under the office buildings and other spaces you mentioned it briefly in saying okay if it's the top floor with the view is a different amount as a ground floor we know in hotel rooms for one night i pay a different amount what's the policy in number one how much office sprais space has a view and what's the range of charges that's what attracts people to the port what's our guideline in terms of how much more premium do we put on the rate. >> i'm going to defer to the at large manager. >> i won't say there's a set policy but obviously in
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negotiations there's a bigger rate. >> what's the range. >> well, it could be 10 percent or 20 percent more. at pier 33 north for example, we received $3.50 a square feet but no view it's 320 >> many people were against this strictly to protect their views so we have is something to offer so let's make sure we charge for it. >> absolutely. >> and you may have touched on this a little bit we may not have the ability to upgrade our office space but have we had an eye of the class c office space
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to office b is that changing a bit for example, many consider a to be the downtown office space but we have space over the water with the changing companies and businesses coming to san francisco that's a changing the category in some respects and class b is measured it's a typically former class a pier 33 north we approved the bay and put $1.5 million into the property it's a small development ground floor and retail and commanding 350 a square feet for the space we put in a elevator and did finishes and the utilities if we have the people to do it we typically get the tenant to do that for
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example, ammunition rounds out the now, it's a lot of tenants want to come in and remove the hung ceiling and that's not cheap to do we get the argued and when we move out we get the better rent. >> we have a priceless view are reindicating riggs what we're offering for the view when i think about autodesk they wanted it to be industrial not a typical class a office space how do we category that and i
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thought commissioner was going down that road. >> that's american people industrial feeling that's in a that's what the tech sector wants he don't want the old style class a but more of an edge i didn't atmosphere it's selling better in san francisco than having the finished class a office space and if we could convert or for example, pier 23 or 19, pier 27 for office we could lease it out the demand is there. the constraints come from the entitlements that we get the change of use and the seismic upgrade is there demand absolutely. autodesk is up to $16 million in investment in the pier. >> right. >> and that is where i was
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going interest thank you commissioner ho. >> i guess along those lines and maybe we're looking at basis rents so we have the ability to - >> yeah. we can go higher. >> wheelchair seeing the tech companies coming in and we have a to make sure we taking into consideration the leases are very, very desirable and not your typical class a office space i would a rather business owner be on the waterfront. >> we're commanding rents and this vs. a lot of offices. >> no one wanted compartment time listed and they want to quickly based on their operations and the growth and size and moving things around that's the way offices are
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configured you don't want wails. >> with autodesk they've got other sites in the area and pier 9 is by far they're most popular site employees requesting to work there and i was reiterating one thing we have an extraordinary low vacancy rate so we want to see the changes we don't have a lot of options unless we get the vacancies. >> that is there's a balance that we have a lot of small businesses sole proprietor and to, you know, a 3 or 5 percent most folks can handle that but when you get into a 40 percent that's tough for a small business we do deserve and trying to get the best rate of return but we're sensitive we
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don't want to drive our small business yourselves out of the market. >> one other thing i'm not sorry i understood accident schedule which your converting the office from that to triple net we come out much lower on an annual basis; is that correct? >> yes. >> when you convert apples to apples it is closer in range $5 off per square feet is significant. >> we have round house we're saying is class b arguably it could be class b minus in pier 9 the rental rates quoted take in a larger geometric area like the downtown and financial district and, you know, frankly they command a higher rate those
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class b's have on site security and property manager on site my a janitor you call they're at our door wondering how to help you. >> if we wanted to translate and understand the costs to us based on the square footage at some point not today, we should have a report how much of the office space has improved like autodesk that have improved it how much more space would we want our office space to be upgraded they'd dir my cash flow and every deal we're not getting the cash in but lour for the fact their improving the property how much more improvements dakota look we've improved? a cash cow and those
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perspectives i'll ask elaine to look at how much further not in the capital budget a that's he dealing with other projects not about upgrading the properties to get a higher rental value but dealing with deficits like they're to fall in the water so what we are doing at improving the deals in the future i'm showing everyone this is the point where it needs more improvement but it's getting a a higher quality space seem like i don't know what we are that 50 or 17 percent on our way because every office space whether in a terminal neighborhood the goal the item before you should be a class a there's to be a vision to get there.
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>> thank you, commissioners susan deputy director for real estate. we are definitely taking notes this is informational so we can come back and adjust things. some of the things to take into consideration with our office like autodesk they're a shed space they took a blank slate and turned it into what they needed if you look at the egg building it's on the water in some cases is a fabulous view but if you go into the building the windows don't open and close and there's no elevator there's a lot of condition issues that hold us back and what we've typically done is rented them in an as is condition if somebody
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wants to upgrade them we'll allow them for ammunition at the round house but in some cases the condition of the building doesn't really allow us to get to that - we're not going to be the class a that's a high-rise with a doorman and the amenities but typically the port hadn't had the capital to upgrade and we typically don't want to upgrade because we want to leave that space for, you know, if you want to put in a design space you're going to want something different if you want to put in a real estate office irving to want to put in something different we don't want to redecide what the in coming tenants will do but accommodate
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what comes to us. one of the reasons we have a low vacancy we have smaller spaces and at an affordable providing price to allow the diversity and we're an incubator for small businesses that can't afford across the street. for some property we're happy to translate our ideas into what could be fm we have the capital >> one other question i'm i'm not sure you we've talked about a floor but if market circumstances change we've set the floor too high do we have something we can readjust that floor. >> i'll ask that. so we don't have a hard and fast
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rule about when to bring forward rates we have a practice in the last six or seven or 8 years to try to do it annually but certainly it depends on the the market conditions so a long query so, yes we can come back what the markets moving ulcer up it's easier to keep negotiating up >> that's my answer. >> and when market are coming down we need to adjust for that. >> up and down you have more flexibility when it's going up this is a base rent vs. when it's going down if the market is moving rapidly you might want to come back and talk about that. >> i've been here long enough
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foyer markets moving down and that's exactly what we did. >> commissioners my further questions. >> thank you jeff and susan. >> item 14 new business. >> commissioners that is. >> well, i just asked for information in the future about our portfolio is comprised that's something that could be calendarized in the future did you understand some of the questions i asked. >> yes. commissioner most of what you asked earlier they can be incorporated into the staff report i wasn't considering that new business i understand your question for the upgrade report on the office spaces spiel what's our vision for improving going forward. >> i didn't mean necessarily we'll also improve but the
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building would be specifically we'll be looking for a tenant to pit their capital in is what i'm trying to suggest not like we go ahead and we're not going to predo anything by the way, we don't know what is tenants want and i understand commissioner thank you. >> the other question when would we be able to hear a report for pier thirty and thirty 32. >> it's on the calendar to get back on commissioner president katz request how much it will cost to target it's august. and on loot 330 and 32 reuse we're working on all the ideas that have flooded in as well as consulting with the